Inside the turnaround of Machinima

Machinima, a network of gaming video channels, is in an awkward position. It was one of the first big YouTube networks to make headlines, quickly growing to 300 million subscribers and raising almost $50 million in venture backing (including from Google, YouTube’s parent company), valuing it at nearly $200 million in 2012. It remains among YouTube’s top five networks.

Before this year, YouTube networks weren’t a hot investment. “Last year you couldn’t get this category on fire if a nuclear missile hit,” says Machinima CEO Chad Gutstein.

Things have changed. The category has been on fire since Disney announced in March that it would plunk down nearly $1 billion (with earn-outs) for Maker Studios. All eyes are on online video—literally. YouTube is the third-largest website in the world; it has almost as many active users as Facebook.

It feels like just about every one of Machinima’s peers has been acquired since then:

In April, BigFrame was acquired by subsidiary of Dreamworks Animation.

In April, Movieclips sold to Fandango, the movie ticket seller owned by NBCUniversal.

In July, Viral Spiral and Base79 sold to a U.K. video distribution site called Rightster for £54.1 million, or about $84.7 million.

In September, Fullscreen Media sold itself to Otter Media for between $200 million and $300 million.

In November, Stylehaul sold to a European television company for $151 million.

Others, including The Onion, College Humor, and Funny or Die, are for sale.

Interest in gaming video content is particularly hot, given Amazon and Google’s recent bidding war for Twitch, a gaming video streaming site. Amazon won, paying $1.1 billion for the company in August.

In theory, Machinima should be at the top of any dealmaker’s list of acquisition targets. Instead, the company is in the midst of a turnaround. It turns out that there is a cost to being first. The companies that come first make the big, expensive mistakes first. Fast-following competitors can learn from their mistakes and leapfrog the trailblazers. (Call it the Myspace-Facebook problem.)

Machinima certainly made some mistakes. In 2013, some gamers in its network—the ones creating content—complained that its life-long “perpetual” contracts were predatory. There was also controversy over the registration of underage creators and for working with “reply girls” who win clicks by posting seductive videos. CEO Chad Gutstein says Machinima was unfairly punished because it was the first and biggest such network. “You think Machinima was the only company that had perpetual contracts? Every single company in the space had perpetual contracts,” he says. “When you’re doing something new, you’re going to make mistakes. It’s about what you do after it.” Machinima renegotiated its contracts with its creators and terminated its deal with a prominent reply girl.

Gutstein was hired in March to replace founder Allen DeBevoise. Gutstein, who hails from the television industry, is tasked with pulling off the rarest feat in startup-land: reviving a damaged brand. Big companies are hungry to acquire companies like Machinima. Just not Machinima, specifically—at least not right now.

Step one in the turnaround has been to change the message. Machinima is not a multi-channel network, or MCN anymore, Gutstein says. It is an M2M, or “many-to-many” service, referring to the 24,700 people who make content for the Machinima network.

Drawing from Gutstein’s experience as COO of a cable network called Ovation, Machinima is now planning a portion of its programming in advance, in order to make it easier for brands to plan ad campaigns. In a September interview, he described how that might look:

When I got to the company there was no programming calendar. No one could say what are we going in October. What do you think our audience cares about in the last weeks of October? They probably care about Halloween. Who else cares about Halloween? Advertisers. So if we can create fanboy and gamer content in the last two weeks of October that’s thematically programmed around Halloween, and we can get the talent that’s part our of network also doing that, that then we can package that audience to an advertiser. That’s what television does all day long.

The difference, then, between Machinima and another multi-channel network like Maker Studies or Fullscreen is that Machinima is driving the programming strategy for its entire network. As a programmer, Gutstein believes Machinima can transition away from an ad network model—where ad impressions are bought and sold programmatically and where Ebitda margins are in the single digits—to more of a cable network model, where ads are bought and sold in packages and where Ebitda margins are anywhere from 30% to 60%.

Gutstein says he’s gotten positive reactions from advertisers as he pitches Machinima’s 2015 programming. He says advertisers tell him, “‘I don’t want to talk to you guys about $500 million worth of budgets, I want to talk about $5 billion worth of budgets,’ which is TV money that we want to move.”

Gutstein has also tried to shift Machinima’s culture to one focused on collaboration and execution. He has rebuilt the senior team, hiring Daniel Tibbets, an executive with Bunim/Murray Productions, as COO and Tricia White, former vice president of human resources for IHOP and Applebee’s, as chief people officer. “I think some of the execution and cultural issues at the company got masked over by growth, and then when you hit hard times, those chickens come home to roost,” Gutstein says. In November, the company launched a new technology platform for creators to manage their businesses, introduced a new tagline (“Heroes Rise”), and revamped Machinima Prime, a channel for premium content created in-house. (A five-minute video featuring a battle between Darth Vader and Batman garnered more than three million views.)

The network now counts 423 million subscribers across all 34,170 of its channels and boasts more than 71 billion views. It remains among YouTube’s five largest programmers for both reach and engagement. Since Gutstein took over, video views increased from 2.2 billion per month to 3.3 billion last month. Machinima’s monthly audience has increased from 115 million viewers to 150 million.

Machinima is under no pressure to sell now, Gutstein says, even though his peers are quickly being snapped up. He compared the deal environment to the real estate market. “When you have a hot block, the last property to sell usually goes for the highest amount of money. That’s a rule in real estate. I think it holds well in corporate finances, too.”

With new $400 million fund, Thrive Capital is New York’s quietest success story

Unlike just about every venture capital firm, Thrive Capital doesn’t tweet. The firm doesn’t have a blog, and it certainly hasn’t hired an in-house journalist, as has been the trend among Silicon Valley venture capitalists lately. Thrive’s website contains just one infuriating line of text, explaining what should be obvious to any visitor: “Thrive Capital is a venture capital investment firm focused on media and internet investments.” Joshua Kushner, managing partner and founder, is extremely reluctant to discuss the firm in the media.

All of venture capital used to be this way. Many old-school investors were reluctant to have websites. No longer: because it is increasingly competitive for venture investors to get into the best deals, many see brand-building “thought leadership” activities—sitting on panels, promoting their portfolio on Twitter, blogging their ideas—as a way to generate deal flow.

For whatever reason, Thrive Capital does not. It doesn’t seem to have hurt the firm one bit. In just five years, Thrive has become known as one of New York’s top venture firms, thanks to splashy consumer Web deals like Kickstarter (crowdfunding), Warby Parker (eyewear), Harry’s (razors), Spotify (streaming music), Whisper (anonymous social network), Urban Compass (apartment hunting), and Fiftythree (creative software for mobile).

The firm’s exits include Twitch, the gaming community that recently sold to Amazon AMZN for $1.1 billion, and Instagram, the photo-sharing app that sold to Facebook FB for $1 billion, as well as GroupMe (group messaging), Makerbot (3D printing), Simple (online banking), and Hot Potato (social activity). Famously, the firm earned a 200% return on its investment in Instagram in just three days. The only notable black eyes for the firm are the its participation in the high-profile funding of Fab, an e-commerce company that has been trying to rebuild itself after laying off the vast majority of its 700 employees last year, and OnSwipe, a mobile publishing company that sold in a “regrettable outcome” in August.)

Thrive’s fund returns aren’t known, but its limited partners are clearly happy: The firm has tripled its fund size with each subsequent vehicle. Thrive Capital Partners I LP, raised in 2009, had just $10 million in commitments. The next fund, a 2011 vintage, raised $40 million. In 2012, a third fund raised $150 million.

Today the firm announces it has raised $400 million for its fourth fund from Princeton University, a previous investor, as well as Wellcome Trust and others.

The new fund signals intentions to expand far beyond the early-stage boutique investing of Thrive Capital’s earliest days. Many venture investors warn of “fund creep,” or the temptation to raise an increasingly large fund, which delivers increasingly higher fees to its managers. That’s not the case here, its founder says.

Since 2009, Thrive has been writing larger checks, often in later stage deals like that of Twitch, Warby Parker, Harry’s, and Spotify. Kushner insists the larger fund won’t change Thrive’s strategy. “We’ve always invested in early and late stage companies, this is just more capital to do it,” he says. Thrive has 13 employees, including partner Chris Paik, who led the firm’s investment in Twitch.

Thrive’s investment thesis is about “creation and destruction,” Kushner says. The “creation” part refers to companies building new forms of self-expression, communication or networking, such as Instagram, Twitch, and Whisper.

The “destruction” part is newer. It comes from Kusner’s experience with Oscar, a health insurance company he launched with Kevin Nazemi and Mario Schlosser earlier this year. Building Oscar, which aims to bring a customer-friendly Web sensibility to health insurance, has been a massive undertaking. The company has raised $150 million in venture backing, including a small piece from Thrive, with the ambition of taking on a huge market.

The experience sparked Kushner’s interest in companies aiming to do the same thing to other massive industries, such as government, education, real estate, and financial services. “There are a lot of industries that represent a large portion of the GDP that have proven business models and have yet to be transformed by technology,” he says. Under this umbrella, Thrive has backed OpenGov, a government data platform, Hightower, a mobile collaboration app for landlords and brokers, 42Floors, a commercial real estate software maker, and General Assembly, an education startup.

Since the 2008 financial crisis, New York’s tech scene has flourished, and a number of Silicon Valley firms have opened satellite offices in the city. But New York still needs Silicon Valley; many of Thrive’s biggest exits are based there. Kushner says he’s seen an increase in West Coast startups seeking out capital from New York firms like his because of the city’s roots in big business. “They view New York as the key to the rest of the world,” he says, “in terms of getting access to traditional industries and other creative outlets.”

Amazon Games VP: ‘We want Twitch to keep doing what they do best’

Amazon is serious about video games. The e-commerce giant just paid $1 billion to acquire online social video company Twitch, which has a devoted monthly fan base of over 55 million gamers watching 15 billion minutes of content created by over 1 million game broadcasters. It’s the latest example of Amazon investing heavily in the burgeoning global video game space.

The company has built its new hardware ecosystem from the ground up with gaming in mind. Amazon acquired developer developer Double Helix Games earlier this year, so it could create exclusive games for its customers. With more people gaming across more devices than ever before—and spending more time each day doing—video games are becoming just as important as movies and television shows in attracting new customers and keeping current subscribers entertained, saysWedbush Securities analyst Michael Pachter.

Amazon AMZN sells approximately 10 million Kindles since the e-reader debuted 2007, according to Pachter, who forecasts the company will also sell 5 million Fire TVs and 2 million Fire Phones this year. With 400 million TVs in the U.S alone, Amazon is entering the domain dominated by Sony SNE, Microsoft MSFT and Nintendo at the same time as companies like Nvidia, Valve, Mad Catz, Ouya and Alienware are targeting the living room. Pachter believes there’s room for multiplayer players in this space and that exclusive games could give Amazon and edge on the competition.

Mike Frazzini, vice president of Amazon Games, discusses the evolution of cross-platform gaming and how the company plans to use Fire TV, Fire phone and Kindle to connect gamers in new ways. Frazzini spoke with Fortune prior to the news Amazon was acquiring Twitch. We reached out Tuesday and asked him about the role Twitch will serve in Amazon’s gaming system. An edited and condensed interview follows.

Fortune: What role will Twitch play within Amazon’s video game ecosystem?

Frazzini: Amazon has long admired Twitch for the innovative social video platform that they’ve created for their community, and we want Twitch to keep doing what they do best. First and foremost, we want Twitch to just keep going. We look forward to learning from Twitch, and over time finding the right ways to help them move faster inventing on behalf of the community.

How were video games part of the design process for Fire TV?

When we started thinking about Fire TV, we knew right away that it would be all about the range of content you can enjoy through the device — movies, TV, music, photos, FreeTime for kids, and of course games. We wanted to make sure customers could find and discover content easily and intuitively using voice search. And we wanted to offer it all at a great price.

We also wanted to be able to offer customers a great gaming experience with a large selection of fun games, at super affordable prices. We wanted both a breadth of games that customers already know and love, like Ashpalt 8 and Minecraft, as well as offering new experiences. That’s one of the reasons we built Sev Zero: Air Support – an exclusive game that combines tower defense with a shooter, and the ability to play co-op with a second screen. In order to deliver a great selection of games at great prices, we needed the hardware and the user experience to work with games. Fire TV comes with 2GB of RAM, for example, which helps a lot with the types of games that we were able to make available.

What did you learn from Kindle gaming with your customers that was applied to Fire TV?

What we learned from Kindle gaming was the importance of making it really easy for developers to launch their games on Fire TV. We’ve spent years with our Appstore making it easier and easier for developers to release their games through our store and on our devices. For example, we have a fast approval process so that developers can get their games live in a very short amount of time. So we wanted to make it easy for developers to bring their existing games to Fire TV. Since Fire OS is built with Android, the process was very easy, with developers telling us they have been impressed with the ease of development and how quickly their games can be ported to Fire TV.

More games and more choice for customers is very important. We also like, and were inspired by, the openness of mobile games, which allow customers to play multiplayer on multiple screens, and wanted to bring that to the TV. You’ll see this with Minecraft where customers can play co-op — one person playing the game on their TV, while others play and interact in the same world with their other mobile devices like their Kindle Fire tablet or iPhone. That happens to be one of the most popular uses of Fire TV for my kids and me. It’s incredibly fun.

How did you go about choosing the chip technology for the big-screen gaming experience?

We wanted to build something that allowed customers to play a huge range of affordable games on a $99 device. And since Fire TV offers so much content, including but not limited to games, we expected many customers to buy it for watching movies and shows…then discover they can play games as well. Or buy it to play games, and also listen to music…The chip technology we chose is perfect for doing this.

What have you seen since launching Fire TV when it comes to game genres and specific games that are popular with your customers?

It’s really been a wide range of genres. Sev Zero: Air Support is definitely popular with our customers, but we expected that since this game was specifically developed for Fire TV. Other popular games include The Walking Dead, Rayman Fiesta Run, Asphalt 8, Ski Safari, Minecraft and GTA. Basically, fun and well-made games that look great on a big screen TV, end up doing very well.

What role do you see multiplayer gaming experiences playing with the move to the big screen?

I see multiplayer gaming playing a pretty big role in relation to the TV experience. It’s not required, but for some games multiplayer just makes them more fun. We had data from a little over a month after the launch of Sev Zero: Air Support, which showed us that people who play with another player using Air Support, play 67% longer than when they play alone. We are excited to see this type of co-op/second screen experience do so well.

How do the demographics for the Fire TV compare to that of the Kindle?

It’s not all that different. The Fire TV is meant for customers who want an entertainment-focused experience, and lots of people will buy it to just watch TV and movies and will wind up playing games, sharing photos on the TV, etc. We found that when you offer customers the option of being able to do a lot of things with a device they often end up using that device for more than what they may have originally intended. We are seeing the same thing hold true with the Fire TV. We are seeing a lot of different customers playing games across many genres.

What did you learn from traditional game consoles that you applied to the Fire TV controller?

We wanted to design a comfortable controller that is also familiar, so customers can just pick it up and play. Our Fire Game Controller features a common layout, which allowed us to offer something familiar.

What opportunities are there for cross-platform gaming experiences across TV, tablet and smartphone?

We’ve already started to get a taste. Going back to our discussion about Minecraft, customers can play multiplayer with multiple screens with one person on the Fire TV, and others on their smartphones or tablets. Sev Zero: Air Support offers up an interesting way to play as well, where one customer is playing the primary game on Fire TV, while a second player is using their tablet to help. In general, with the proliferation of connected devices, and using the cloud to enable seamless connections, there’s a huge opportunity for cross-platform play. It’s very open and there are many possibilities. From what we’ve seen so far, we know cross-platform gaming resonates with customers, and we look forward to seeing what new experiences developers dream up.

Gaming for good—with celebrities

Video gaming has become a global pastime. And these days, Millennials spend a lot of time watching or broadcasting live streams of video games and eSports events. The rise of live streaming platforms like Twitch and YouTube has opened up new opportunities for charities to connect with this worldwide phenomenon. Tiltify.com, which just launched in beta form this month, has been designed to connect Hollywood and YouTube celebrities, athletes and charities with gamers to raise money for good causes. It’s crowdfunding for a good cause.

Several charities have already started raising money through the platform, which has been designed for seamless integration into Twitch and YouTube to reach a large gaming audience. Microsoft has teamed up with Indy Car racers Josef Newgarden and Justin Wilson for the “Race Against Cancer” campaign to benefit Teen Cancer America. Fans have the chance to win an opportunity to race against the professional drivers in the Xbox One game Forza 5 on August 28 with the action livestreamed on Twitch.

“It’s a cool way for people to get involved in a good cause and also enter for a chance to do something pretty special in racing against Justin and me in what’s my favorite video game,” said Newgarden. “Using Forza 5 draws in a lot of hardcore racing people. I know if I wasn’t a professional driver, the one thing that’d I’d want to be able to do is race against someone that was a professional.”

Michael Wasserman, CEO of Tiltify, said that over the coming months there will be a lot of innovative campaigns involving athletes, celebrities and charities. Since the platform is brand new, many campaigns are in the development stages. About a dozen charities have already signed up for the platform, and Wasserman expects to have around 50 by the end of the month.

“The idea was how do we make fundraising more fun,” said Wasserman, who has been involved in traditionally Hollywood fundraising for a decade. “Celebrities and athletes love to play video games as much as the rest of us, so we created a platform that everyone can use that is video gaming for charity in a global way. We talked to a lot of gamers and celebrities and time commitment is always an issue with them, but they can play video games from anywhere with video chat.”

The key piece to the puzzle that made Tiltify a reality is Twitch. The livestreaming site, which has more than 55 million monthly users and may soon be acquired by Google GOOG, says gamers spend an average of 106 minutes per person per daily session. The interactive nature of these livestreams can connect charities and celebrities with gamers.

“Gamers, as a group, are very giving — more than people perceive in the mainstream,” said Wasserman. “They want to raise money and help, but there wasn’t an avenue to do that. We make it easy for everyone to get involved. The popularity of Twitch and YouTube has opened up a huge opportunity to create something new for fundraising.”

Tiltify has also talked to popular YouTube companies like Fullscreen-owned Screw Attack, Defy Media’s Smosh Games and Rooster Teeth about fundraising opportunities.

“We can enhance a YouTube channel through these fundraising campaigns because you’re embedding your actual stream,” said Wasserman. “We can bring more people to your channel by partnering with the American Red Cross and doing a fundraiser that brings a whole new audience and increases traffic to your channel. For a lot of YouTubers, bringing more people to their channel is the bread and butter of their careers. Tiltify give them the opportunity to offer rewards through donations.”

For the “Racing Against Cancer” campaign, Microsoft MSFT has donated digital copies of the game as well as downloadable content codes to encourage participation and try to reach the goal of $50,000 for Teen & Young Adult Cancer Centers. Gaming is already being used to help charities fight cancer.

“Whenever we build a teenage facility in a hospital we include gaming equipment because it is such an important part of youth culture,” said Simon Davies, executive director of Teen Cancer America. “The experience of having cancer and being in the hospital for extended periods can be distressing and depressing. Anything that can take young people away from the intensity of the experience and give them an outlet can have positive value in lifting their spirits and relieving their tension. It is also a medium for communication between teenagers as a method of bringing them together in support of each other.”

Taking a page from gamification, in addition to campaigns, there are missions for people to donate to. The American Red Cross is raising $25,000 for a “Disaster Relief” mission for blankets, comfort kits and hot meals. The AbleGamers Charity, which tries to improve the quality of life for people with disabilities using the power of digital entertainment, has a $200,000 “Driving Home Accessibility” mission to create a vehicle that is able to go help transport gamers with disabilities to research labs and game conventions. The van will be filled with gaming hardware and the latest accessibility technology. Each of Tiltify’s campaigns and missions explains exactly how the donations will be used.

Tiltify currently offers secure charitable donations through FirstGiving.com, which verifies all 501c charities on the site. The company will be adding multiple processing partners, including PayPal. Wasserman said Tiltify independently verifies each charity on its site so gamers know their donations are going to good use.

“Gamers are likely to have their own charitable cause in which they are interested,” said Davies. “It is likely they, themselves, will see the value of using gaming as a fundraising and awareness raising mechanism. I think it has tremendous opportunity.”

Over the coming months, it will be up to gamers to “press start” and game for their favorite causes.

YouTube reportedly buying Twitch for $1 billion

FORTUNE — AT&T T buying DirecTV isn’t the only deal going on in the tech space early this week.

Though it may not be quite as earth-shattering as that telecom merger, YouTube’s reported plan to buy Twitch would represent the former’s biggest acquisition ever.

The deal would be for $1 billion, according to a report in Variety. Twitch is a videogame streaming service, allowing gamers to upload live feeds of themselves playing games that are watchable from videogame consoles.

YouTube’s attorneys are preparing for a potential antitrust challenge to the deal, according to the report.

Twitch was launched in June 2011. It boasts more than 45 million visitors per month, according to its website. YouTube, which revolutionized online video and was launched in 2005, was purchased by Google GOOG in 2006 for $1.65 billion.

Twitch rides video game streaming wave to global success

FORTUNE — The odds are that if you’re under 30 and play video games, you’re already aware of Twitch. If you’re older and don’t play games, then you’re not one of the 45 million unique visitors per month that flock to the social live streaming site. Over 600,000 everyday gamers — as well as game developers, publishers, and even professional gamers — use the site to broadcast to the world every month. The site’s growth helped it secure $20 million in funding this week.

Studios showcase exclusive gameplay demos of new games like Activision’s ATVICall of Duty: Ghosts through Twitch. Professional video game players can chat and connect with fans directly through live streamed practice sessions, all the while making money from the advertisers that are lining up to be part of this newfound phenomenon. As the exclusive streaming partner of ReedPOP, the largest producer of pop culture events in the world, Twitch broadcasts games and other content from events like New York Comic Con and Chicago Comic Con and indie video game shows PAX East and PAX Prime.

Friday night, Riot Games is using Twitch to live stream the League of Legends Championship Series (LCS) World Championship from the sold-out Staples Center in Los Angeles. A record 5 million gamers visited the site on September 15 to watch the top League of Legends pro gamers compete for a chance to battle for more than $2 million in cash prizes and play in front of 12,000 fans from around the world. League of Legends viewers spend an average 70 minutes watching content, compared to the average 7 minutes spent watching general YouTube content.

“The biggest eSports (electronic sports) events broadcast on Twitch receives millions of unique viewers,” said Matthew DiPietro, vice president of marketing at Twitch. “Collectively, these events match and often beat broadcast/cable TV audience sizes.” DiPietro adds Twitch not only broadcasts these big events, but it also features user-generated content, creating what he calls,”a kind of central social video hub for all things gaming.”

Twitch powers the live streams of the two biggest eSports organizations in the world — Major League Gaming (MLG) and the Electronic Sports League (ESL). According to Peter Warman, founder of video game research firm Newzoo, “to date this year consumers have watched over 33 million hours of video streamed game content on ESL.tv alone — all powered by Twitch.”

That’s helped Twitch grow from 3 million viewers in June 2011, when it was spun from live streaming company Justin.tv, to over 45 million viewers today. These gamers are sticking to the site, as well. On average, 100 minutes are watched per person daily on Twitch. Valve’s recent The Invitational 3 Dota 2 video game tournament saw gamers log in for an average of 2 hours per day to see who would win the $2.8 million in cash prizes.

That type of engagement with the coveted 15-to-34-year-old male gaming demographic resulted in this week’s Series C $20 million investment led by Thrive Capital with participation from WestSummit Capital and Take-Two Interactive Software TTWO, as well as additional funds from existing investors including Alsop Louie Partners and Bessemer Venture Partners.

DiPietro said this latest investment will enable Twitch to continue scaling its sales division and infrastructure to meet the demand of its rapidly growing viewership. This is especially relevant with the impending launch of the PlayStation 4 and Xbox One in November. Since both consoles will feature Twitch, the door is being opened to an even broader audience. He pointed out that more than half of U.S. households have at least one gaming console, so if the adoption rate of new consoles mirrors this trend, that’s a lot of potential Twitch users. Twitch is expanding its 15 global data centers to handle this influx of new gamers.

“Twitch has done something few have done in live streaming: They have attracted users,” said Michael Pachter, video game analyst, Wedbush Securities. “That is the hardest thing to replicate, and people won’t switch once they are comfortable using Twitch. They are putting up barriers to entry by being an app on Xbox One and PS4, so I think they will broaden their competitive moat.”

Twitch is facing competition in the gaming live streaming space from the giant YouTube GOOG and the smaller Azubu, which are also live streaming the World Championship from Staples Center Friday. According to CEO Ian Sharpe, Azubu has a three-step plan to grow the eSports community: discover and break emerging new talent, attract high-profile marketing sponsors, and broadcast competitions in lag-free HD. Azubu also provides commentary for those with a casual interest in eSports, to make the space more inclusive.

“We say that Azubu is ‘By Players, For Players,’” said Sharpe. “We aren’t just a vehicle for broadcasting games. We are investing in the eSports community, sponsoring teams, nurturing talent, and designing a platform directly with our top players that they can all be proud to be part of. Competition is in our DNA, it’s what helps us grow as a human race. Competition for viewers between Azubu, Twitch, and YouTube can only be good for the eSports industry. Choice is the essence of evolution.”

Warman believes that if Twitch can keep up with the growth on PC and expand with Xbox One and PS4 content, it will be hard for anyone to compete with them.

“It would require a huge initial investment, in addition to the business agreements and brand value that they have built up,” said Warman. “Do not forget that Twitch is becoming a very respected brand among gamers. Twitch is present at every key game event.”

Pachter said that Twitch, which is ad-supported, could already be worth as much as $1 billion, but Warman believes the company is likely valued lower today. The near future could be a different story.

“I am simply fascinated by how Twitch ties together hot trends in gaming like broadcasting and online communities,” said Warman. “If they can keep focused on delivering what gamers want, they will be worth a billion dollars. What Valve did for the distribution of games with Steam, Twitch is doing for the broadcasting of games.”

Coke Zero KO just entered the eSports arena with Riot Games and will integrate its brand into a new minor league Challenger Series next year for League of Legends. American Express AXP, Nissan NSANY, Papa John’s Pizza PZZA, Qualcomm QCOM, and Samsung have already gravitated to pro gaming, thanks in part to the opportunities live streaming has opened up.

“The eSports audience is a particularly valuable one for brand advertisers because they are hard to reach via traditional media channels,” said DiPietro. “They tend to be extremely tech savvy, they are often cord-cutters, and they are hyper-engaged in the online video and chat experience — all of which makes them very valuable for advertisers.”

“Advertisers want to attract eyeballs,” said Pachter. Live events are more compelling than time-shifted or recorded events, meaning that advertisers have an audience that is more likely to be glued to the monitor. That is a huge opportunity, particularly with the Twitch demographic.”

Moving forward, DiPietro said Twitch wants to be everywhere that gamers are. That goes beyond the next-gen consoles. The company is ramping up its mobile offerings so that the Twitch viewing and streaming experience is universal regardless of what platform gamers use.

Twitch has been able to ride the wave of social interactivity, live streaming and video game sharing, which has created a perfect storm of user engagement for the growing number of global gamers.